U.S. stocks slid, following
equities’ biggest gain since May, as China’s currency devaluation
sparked concern across global markets that the world’s second-largest
economy is headed for a deeper slowdown.
Companies that rely heavily on exports to China, including auto and luxury goods makers, retreated. General Motors Co. and Tiffany & Co. lost more than 1.6 percent. Apple Inc. sank 2.9 percent. Commodity producers from Freeport-McMoRan Inc. to Dow Chemical Co. fell at least 2.9 percent amid concerns about China’s growth. Google Inc. advanced 4 percent after saying it will reorganize into a holding company called Alphabet Inc.
The Standard & Poor’s 500 Index declined 0.9 percent to 2,084.57 at 11:19 a.m. in New York, and fell below the benchmark’s average prices during the past 50 and 100 days. The Dow Jones Industrial Average dropped 209.85 points, or 1.2 percent, to 17,405.32. The Nasdaq Composite Index slipped 0.9 percent.
“The driving forces today continue to be macro-oriented with China the most important,” said Tom Wright, the New York-based director of equities at JMP Securities. “We spend a lot of time obsessing over Greece or Puerto Rico, but China is a much bigger economy and a much bigger problem to the global economy and devaluing the currency is shaking people up.”
China devalued the yuan by 1.9 percent, the most in two decades, after data this month showed a plunge in exports, weaker-than-estimated manufacturing and a slowdown credit growth. The surprise move rippled through global markets, sparking selloffs in emerging-market currencies, commodities, and auto and luxury stocks with exposure to China.
Investors are assessing economic data to gauge when the Federal Reserve will raise interest rates for the first time since 2006. A report today showed worker productivity struggled to gain traction in the second quarter. Less efficiency limits how quickly the economy can grow without spurring inflation, adding another variable for policy makers to consider in deciding when to raise rates.
The unexpected move by China’s policy makers bolstered speculation the Fed may have to delay raising rates, as the threat of a slowdown in China could harm global growth, while lower commodity prices damp inflation. The probability of a rate increase in September slipped to 46 percent from 54 percent Monday, according to futures trading data compiled by Bloomberg.
Of the S&P 500 members that have already reported, 74 percent beat profit estimates and about half topped sales projections. Analysts now project a more modest drop in second-quarter earnings, calling for a 2.1 percent fall instead of a 6.4 percent decline a month earlier.
The Chicago Board Options Exchange Volatility Index climbed 12 percent Tuesday to 13.66, after falling 8.7 percent Monday. The gauge, known as the VIX, rose 10 percent last week after posting its biggest monthly drop since February.
Eight of the S&P 500’s main groups fell today, with energy and raw-materials shares sliding the most and reversing gains yesterday that were the strongest in at least seven months. Phone companies and utilities advanced.
Raw-material companies slid 2 percent after the biggest year-to-date gain yesterday as copper futures erased most of yesterday’s advance. Freeport-McMoRan plunged 13 percent, the most since January and eclipsing Monday’s 11 percent climb. Alcoa Inc. sank 5.4 percent after a 7.1 percent jump yesterday.
Joy Global Inc. and Caterpillar Inc. lost at least 2.8 percent as industrial shares slid 1.2 percent. Caterpillar, one of the largest producers of mining trucks, may be hurt by weak demand following low mining-equipment shipments in the second quarter, according to a Bloomberg Intelligence report.
Companies that rely heavily on exports to China, including auto and luxury goods makers, retreated. General Motors Co. and Tiffany & Co. lost more than 1.6 percent. Apple Inc. sank 2.9 percent. Commodity producers from Freeport-McMoRan Inc. to Dow Chemical Co. fell at least 2.9 percent amid concerns about China’s growth. Google Inc. advanced 4 percent after saying it will reorganize into a holding company called Alphabet Inc.
The Standard & Poor’s 500 Index declined 0.9 percent to 2,084.57 at 11:19 a.m. in New York, and fell below the benchmark’s average prices during the past 50 and 100 days. The Dow Jones Industrial Average dropped 209.85 points, or 1.2 percent, to 17,405.32. The Nasdaq Composite Index slipped 0.9 percent.
“The driving forces today continue to be macro-oriented with China the most important,” said Tom Wright, the New York-based director of equities at JMP Securities. “We spend a lot of time obsessing over Greece or Puerto Rico, but China is a much bigger economy and a much bigger problem to the global economy and devaluing the currency is shaking people up.”
China devalued the yuan by 1.9 percent, the most in two decades, after data this month showed a plunge in exports, weaker-than-estimated manufacturing and a slowdown credit growth. The surprise move rippled through global markets, sparking selloffs in emerging-market currencies, commodities, and auto and luxury stocks with exposure to China.
Fed Watch
A rally in commodities from oil to copper helped the S&P 500 jump 1.3 percent Monday. Those trades reversed today on concern demand will slow from China, the world’s biggest consumer of energy and metals, and yuan weakness will erode the buying power of Chinese consumers.Investors are assessing economic data to gauge when the Federal Reserve will raise interest rates for the first time since 2006. A report today showed worker productivity struggled to gain traction in the second quarter. Less efficiency limits how quickly the economy can grow without spurring inflation, adding another variable for policy makers to consider in deciding when to raise rates.
The unexpected move by China’s policy makers bolstered speculation the Fed may have to delay raising rates, as the threat of a slowdown in China could harm global growth, while lower commodity prices damp inflation. The probability of a rate increase in September slipped to 46 percent from 54 percent Monday, according to futures trading data compiled by Bloomberg.
Earnings Season
Investors will also look to corporate releases, as the earnings season draws to a close. Cisco Systems Inc. and News Corp. are among companies posting quarterly updates this week.Of the S&P 500 members that have already reported, 74 percent beat profit estimates and about half topped sales projections. Analysts now project a more modest drop in second-quarter earnings, calling for a 2.1 percent fall instead of a 6.4 percent decline a month earlier.
The Chicago Board Options Exchange Volatility Index climbed 12 percent Tuesday to 13.66, after falling 8.7 percent Monday. The gauge, known as the VIX, rose 10 percent last week after posting its biggest monthly drop since February.
Eight of the S&P 500’s main groups fell today, with energy and raw-materials shares sliding the most and reversing gains yesterday that were the strongest in at least seven months. Phone companies and utilities advanced.
Energy, Materials
Energy shares lost 1.9 percent for the biggest loss in the S&P 500 as all 40-members in the sector declined. Consol Energy Inc. lost 5.6 percent and Chesapeake Energy Corp. fell 5.4 percent to lead declines.Raw-material companies slid 2 percent after the biggest year-to-date gain yesterday as copper futures erased most of yesterday’s advance. Freeport-McMoRan plunged 13 percent, the most since January and eclipsing Monday’s 11 percent climb. Alcoa Inc. sank 5.4 percent after a 7.1 percent jump yesterday.
Joy Global Inc. and Caterpillar Inc. lost at least 2.8 percent as industrial shares slid 1.2 percent. Caterpillar, one of the largest producers of mining trucks, may be hurt by weak demand following low mining-equipment shipments in the second quarter, according to a Bloomberg Intelligence report.
